Government to tighten rules for senior VAT tax refunds, says refunds are intended for necessities, not luxuries

SRI director Ximena Amoroso

Saying that the system that provides tax refunds to residents over the age of 65 has been abused, the government said Wednesday it plans to reduce the number of  deductible items. The new rules will only affect value added tax (VAT) refunds, not those for real estate, utilities and transportation.

Ximena Amoroso, director of Ecuador’s Internal Revenue Service (SRI), says that deductions have been claimed for luxury items as well as necessities and that, in many cases, friends and family members of seniors have collected receipts to be submitted.

“The VAT refund is intended for basic necessities such as health, housing, education, food and clothing,” Amoroso says. “We are discovering that deductions are being taken on other items that do not fall into these categories,” she added.

Refunds will be eliminated on such items as televisions, appliances,  jaccuzis and furniture, she said, as well as for bulk purchases that appear to be for the benefit of third parties.

Amoroso says that legislation titled Economic Incentives and Tax Fraud Prevention will be sent to the National Assembly next week and that its passage will strengthen review of deductions that will be granted. “There will be fewer items approved for deductions,” she said.

Currently, seniors can submit invoices with VAT charges and be reimbursed in seven to eight days. The maximum reimbursement per month is $204. The VAT tax is 12% of the cost of items purchased.

Between January and October this year the government has returned $127 to senior citizens and tourists, a figure that is 21% higher than for the same period last year. Amoroso says that refunds for tourists will not be affected by the new rules.